ACCY 200 Exam 2 (Continued)

Which of the following statements does not describe a characteristic of management accounting?

Management accounting must conform to GAAP.

Each of a company's several product lines has a different contribution margin ratio. Total sales in 2011 were 20% higher than total sales in 2010. Total contribution margin for 2011 will be:

More than 20% higher than it was in 2010, if the sales mix changes and proportionately more high contribution margin ratio products are sold in 2011 than in 2010.

A 10% change in a firm's revenues is likely to result in a change of more than 10% in the firm's operating income because:

Not all of the firm's costs will change in proportion to the revenue change.

The concept of operating leverage refers to which of the following?

Operating income changes proportionately more than revenues for any given change in activity level.

To which function of management is CVP analysis most applicable?

Planning

Managerial accounting, as opposed to financial accounting, is primarily concerned with:

Present and future planning and control.

An example of a cost that is likely to have a variable behavior pattern is:

Production labor wages or direct labor cost.

Managerial accounting supports the management process most significantly by:

Providing estimates of financial results for various plans.

Which of the following activities is not part of the management planning and control cycle?

Providing information to investors and creditors.

Simplifying assumptions made when using cost behavior pattern data include:

Relevant range and linearity.

Operating income using the contribution margin format income statement is calculated as:

Revenue - Variable Expenses = Contribution Margin - Fixed Expenses

Which of the following is another term for mixed costs?

Semivariable costs.

A ____________ is the minimum cost that can be incurred, which when subtracted from the selling price, allows for a desired profit to be earned.

Target cost

Each of a company's two product lines has a different contribution margin ratio. If the company's total sales remain the same but the sales mix shifts toward selling more of the product with the higher contribution ratio, which of the following is true?

The average contribution margin ratio will increase. The break-even point will decrease. Operating income will increase.

Managerial accounting can best be described as:

The preparation and use of accounting information within the organization.

The term "relevant range" refers to:

The range of activity where cost relationships are valid.

When the cost behavior pattern has been identified as fixed at a certain volume of activity:

The total cost may change if the volume of activity changes substantially.

As the total volume of activity changes:

The total of variable costs changes.

The formula for expressing the total of a fixed, variable, or mixed cost at any level of activity is:

Total Cost = Fixed Cost + (Variable Rate x Volume of Activity).

ABU Co. has several products, each with a different contribution margin ratio. If the same number of units were sold in July as in June, but the sales mix changed:

Total contribution margin in July would be different from that in June.

Which of the following costs are not relevant in a decision to continue or discontinue a segment of the organization?

Unavoidable costs.

Managerial accounting, as compared to financial accounting:

Uses frequent and prompt control reports.

The contribution margin ratio always decreases when the:

Variable cost increases and the selling price remains constant.

Expressing fixed costs on a per unit basis of activity is misleading because:

Fixed cost per unit decrease as activity increases.

As the level of activity increases:

Fixed cost per unit decreases.

Opportunity costs are:

Forgone benefits.

An income statement organized by cost behavior does not include:

Gross profit.

Which of the following terms do not appear on the contribution margin format income statement?

Gross profit.

A sunk cost is a cost that:

Has been incurred and cannot be eliminated. Is never relevant in decision-making. Is never a differential cost.

When the firm's activity requires it to operate at a level above the upper boundary of the relevant range, fixed expenses are likely to:

Increase.

The key to analyzing a sell as is or process further decision is to determine that:

Incremental revenues exceed incremental costs.

A cost is considered relevant if:

It makes a difference.

The cost of a single unit of production in excess of the breakeven point in units is:

Its variable cost only.

What percentage of the contribution margin is profit on units sold in excess of the breakeven point?

100%.

An example of a cost likely to have a fixed behavior pattern is:

Advertising cost.

Management accounting is:

An activity that gets involved with virtually all of the other functional areas of the organization.

Relevant costs in decision-making:

Are future costs that represent differences between decision alternatives.

In a make or buy decision, which of the following costs would be considered relevant?

Avoidable costs.

Performance analysis in the planning and control cycle relates to the act of:

Controlling.

When the high-low method of estimating a cost behavior pattern is used:

Cost and volume data must be reviewed for outliers.

________ costs between two alternative projects are those that would result from selecting one alternative instead of the other.

Differential

An example of a cost likely to have a mixed behavior pattern is:

Electricity cost for the manufacturing plant.